Correlation Between Sun Life and Sprott Physical

Can any of the company-specific risk be diversified away by investing in both Sun Life and Sprott Physical at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sun Life and Sprott Physical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sun Life Financial and Sprott Physical Gold, you can compare the effects of market volatilities on Sun Life and Sprott Physical and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sun Life with a short position of Sprott Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Sprott Physical.

Diversification Opportunities for Sun Life and Sprott Physical

0.63

Correlation Coefficient

Sun Life  Sprott Physical

Poor diversification

The 3 months correlation between Sun and Sprott is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Sprott Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Gold and Sun Life is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sun Life Financial are associated (or correlated) with Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Gold has no effect on the direction of Sun Life i.e., Sun Life and Sprott Physical go up and down completely randomly.

Pair Corralation between Sun Life and Sprott Physical

Assuming the 90 days trading horizon Sun Life is expected to generate 5.63 times less return on investment than Sprott Physical. But when comparing it to its historical volatility, Sun Life Financial is 1.2 times less risky than Sprott Physical. It trades about 0.06 of its potential returns per unit of risk. Sprott Physical Gold is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  3,396  in Sprott Physical Gold on December 30, 2024 and sell it today you would earn a total of  624.00  from holding Sprott Physical Gold or generate 18.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Sun Life Financial  vs.  Sprott Physical Gold

Sun Life Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Sun Life is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Sprott Physical Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Sprott Physical displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and Sprott Physical

The main advantage of trading using opposite Sun Life and Sprott Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Sprott Physical can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sprott Physical will offset losses from the drop in Sprott Physical's long position.

The idea behind Sun Life Financial and Sprott Physical Gold pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.